Three years ago, Dr. Keith Smith, co-founder and managing partner of the Surgery Center of Oklahoma, took an initiative that would only be considered radical in the health care industry: He posted online a list of prices for 112 common surgical procedures. The 51-year-old Smith, a self-described libertarian, and his business partner, Dr. Steve Lantier, founded the Surgery Center 15 years ago, after they became disillusioned with the way patients were treated at St. Anthony Hospital in Oklahoma City, where the two men worked as anesthesiologists. In 1997, Smith and Lantier bought the shell of a former surgical center with the aim of creating a for-profit facility that could deliver first-rate care at a fraction of what traditional hospitals charge.
The major cause of exploding U.S. heath care costs is the third-party payer system, a text-book concept in which A buys goods or services from B that are paid for by C. Because private insurance companies or the government generally pick up most of the tab for medical services, patients don't have the normal incentive to seek out value.
The Surgery Center's consumer-driven model could become increasingly common as Americans look for alternatives to the traditional health care market—an unintended consequence of Obamacare. Patients may have no choice but to look outside the traditional health care industry in the face of higher costs and reduced access to doctors and hospitals.
Because bills charged by Integris are paid primarily by insurance companies or the government, the hospital gets away with gouging for its services. Reason obtained a bill for a procedure that Dr. Sigmon performed at Integris in October 2010 called a “complex bilateral sinus procedure,” which helps patients with chronic nasal infections. The bill, which is strictly for the hospital itself and doesn't include Sigmon's or the anesthesiologist's fees, totaled $33,505. When Sigmon performs the same procedure at the Surgery Center, the all-inclusive price is $5,885.
The Integris bill for the same nasal procedure went to Blue Cross of Oklahoma, so the patient had no compelling reason to question its outrageous markups. They included a $360 charge for a steroid called dexamethasone, which can be purchased wholesale for just 75 cents. Or the three charges totaling $630 for a painkiller called fentanyl citrate, which all together cost the hospital about $1.50.